Journalists and police officers stand outside the Organisation of the Petroleum Exporting Countries (Opec) headquarters in Vienna, Austria December 5, 2019. Saudi media quoted Energy Minister Prince Abdulaziz bin Salman as saying in his opening remarks that the pandemic means it is more vital than ever that reliable and affordable energy supplies are available.
OPEC and its allies led by Russian Federation agreed on Thursday to cut their oil output by more than a fifth and said they expected the United States and other producers to join in their effort to prop up prices hammered by the coronavirus crisis.
Russian Pres. Putin says he views the OPEC+ deal "very positively" as a compromise agreement that will have a positive impact in stabilizing global markets. In 2014, when Saudi Arabia tried to challenge USA oil producers by flooding the market with cheap oil to drive United States producers out of business, the U.S. companies were only able to stay afloat with the benefit of massive intervention by financial institutions, which provided injections of liquidity that kept the frackers afloat until Saudi Arabia backed off.
Although this is said to be the biggest cut ever agreed on by the world's oil producers, however, there are still doubts about the effectiveness of the cuts considering the magnitude of the fall in the demand side and the agreement itself is also not completely solid yet.
Global oil demand has dropped by about 30 percent since the coronavirus outbreak, leading to many countries to establish lockdown orders limiting travel and movement.
"We argued that it was hard for us to cut production as much as they were asking", he said.
Last month, Saudi Arabia, anxious about declining oil prices as after the coronavirus crisis set demand plummeting, proposal to cut production.
Oil is having a choppy trading session, waiting for the results of the key OPEC+ meeting.
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Expectations for the Opec meeting were high. Bloomberg News reported that the main bottleneck was Mexico's unwillingness to agree to its share of cuts under the deal, which would have been 400,000 barrels per day.
Starting in 2021, a reduction of six million barrels per day will last for 16 months.
Previously, Russia has stated that it was hard for the country to cut oil production due to the nature of deposits and cold climate.
Now, OPEC+ countries want G20 countries to join their efforts and deliver an additional oil production cut. "India has always advocated a stable oil market, which is reasonable for producers and affordable for consumers..."
In the time since, prices have collapsed.
An agreement from OPEC+ and a broader alliance including America is crucial to reviving prices that have sunk to an 18-year low. To survive financially, most U.S. fracking operations require oil prices in the range of $40-60 dollars per barrel.
He added that Covid-19 had completely changed the dynamic of the oil market, saying: "Normally the best cure for a low price is a low price because it attracts increased demand, but this is a completely different ball game".
"That is a global deal", one OPEC source said as the OPEC, Russia, and others that make up the OPEC+ group held a video conference.